The Amending Finance Act for 2012 was approved by the French Parliament in July 2012 and officially came into force on August 18. The Act’s goal is to reduce the government deficit and attempts to do this by changing tax laws which affect individual, corporate and international taxation.
The new law includes provisions that raise taxes on dividends, increases in Social Security contribution rates, stricter provisions on the use of carryforward tax losses and anti-abuse provisions in connection with participation exemption regimes. Inheritance and Gift taxes have also increased beginning August 18, 2012. A temporary wealth tax surcharge is also due from taxpayers subject to the wealth tax in 2012.
Of interest to Foreign investors, the new law introduces extensions of social contributions on French real estate income and capital gains realized by non-French, non-resident individuals. Social Contributions are in addition to income tax and capital gains tax and national insurance contributions. Non-French tax resident individuals are now going to be subject to a social contribution tax of 15.5%. These taxes are to be applied to rental income earned beginning January 1, 2012 and on capital gains on the sale of French real estate and or shares in companies owning real estate on or after August 18, 2012.
The total tax rates on the sale of French real estate will vary because of the capital gains tax (CGT). The CGT rates are as follows: 19% (EU, Iceland, Norway, Liechtenstein, Switzerland), 50% (Uncooperative states such as Brunei, Guatemala, Montserrat, Philippines, Botswana), and 33.33% for all other nations. The total tax rates for the sale of French real estate (CGT + Social Contributions) can now be anywhere from 34.5% to 65.5% depending on the seller’s residence.
The wealth tax surcharge affects taxpayers whose taxable assets for 2012 are over €1.3 million. The rate of the surcharge is from .55% to 1.80% depending on the net value of assets.
Source: www.lg-legal.com
